Trivia!
Which state capitol renovation is estimated to cost at least as much as construction of a new NFL stadium?
State Budget Updates
Revenue Forecast Status: It’s Complicated
On June 26, the Washington State Economic and Revenue Forecast Council met to receive the latest Revenue Forecast from the State Economist, Dave Reich.
As the heading indicates, the latest Revenue Forecast is complicated, and if you watched the Council’s session on TVW, you could see Council members themselves seeking clarification through their questions. One of the reasons why this forecast is complicated is because its release is so close to the end of the legislative session, and enacted policies have not gone into effect. As a result, the forecast must rely on fiscal note estimates rather than actualities. Legislators noted this challenge in their questions of the State Economist.
On the downside, due to weak economic growth and lower personal income, projected revenue from the February forecast is reduced further by nearly $1 billion through the 2029-31 biennium. The reductions break out by biennium as follows:
- 2025-2027 (-$427 million)
- 2027-2029 (-$450 million)
- 2029-2031 (-$122 million)
On the upside, higher than expected Capital Gains tax revenues will temporarily offset reduced revenues for the 2025-27 biennium. Per the State Economist, Capital Gains tax revenue for State Fiscal Year 2026 will yield $1.5353 billion, which is 178% higher than State Fiscal Year 2025 collections. This year, the Legislature made a policy change that revenue from the Capital Gains tax in excess of $500 million would be deposited into the Education Legacy Trust Account, rather than the Common Schools Construction Fund as originally designated.
A total of 21.6% of the total Capital Gains revenue for State Fiscal Year 2026 is due to a new policy which adds an additional 2.9% tax rate on Capital Gains exceeding $1 million. This increase brought in $331.9 million.
I’m including the slides shared with Council members to illustrate the larger economic picture. You can see the forecasted changes in red which represent the updated projections from the February revenue forecast (reduced revenue due to slow economic growth and lower personal income) and the non-economic change column includes expected revenue from enacted policies/tax packages. Note that the higher-than-expected Capital Gains Tax receipts in State Fiscal Year 2026 are represented in the first chart under the Education Legacy Trust Account non-economic change column.
Two additional Revenue Forecasts are scheduled prior to release of Governor Ferguson’s 2027-29 biennial budget – September 25 and November 16.
It’s complicated, yes?
Caseload Forecast
On June 11, the Washington State Caseload Forecast Council met to receive the latest forecast for entitlement programs. Like the Revenue Forecast, the Caseload Forecast is an important part of the budgeting process. Whereas the Revenue Forecast represents “money in,” the Caseload Forecast represents the state’s constitutionally required “money out.” The Caseload Forecast projects how many individuals are expected to participate in entitlement programs such as K-12, Medicaid, prisons and more.
This summary document contains a page detailing those programs with expected caseloads higher than the previous forecast, lower than the previous forecast and unchanged from the previous forecast. Especially in times of limited fiscal resources, you want to see the “unchanged from previous forecast” column the longest. This means there isn’t a huge upswing in demand for services, necessitating additional state investment.
In terms of early learning forecasted programs, ECEAP is higher than the February forecast for State Fiscal Year 2027 by 1,901 students. This increase is reflective of enactment of the PreK Promise Act (Ballmer Group’s gift to support ECEAP expansion). The accompanying narrative flags risk with this forecast as there could be staffing, space or enrollment challenges that result in fewer children participating than forecasted.
Working Connections Child Care comes in under the “unchanged” category with the forecast increasing caseload by 40 families in State Fiscal Year 2026 and by 87 families in State Fiscal Year 2027. Note that the forecast did not model anticipated caseload changes associated with the attendance policy change adopted in 2026.
Finally, Transition to Kindergarten (TTK) shows a 2,160-student caseload reduction in the 2026-27 school year, placing that program in the “lower than February 2026” category. The accompanying narrative notes that going forward, the Caseload Forecast will align TTK caseload with the funding level allocated in the budget.
The next Caseload Forecast will be released on November 12 and will be used to inform Governor Ferguson’s proposed 2027-29 biennial budget.
The Future of the Millionaire’s Tax – Likely Headed for November Ballot?
On July 2, the Washington State Standard reported that “Let’s Go Washington,” the group looking to repeal the newly enacted Millionaire’s tax submitted more than 500,000 signatures to support a November ballot initiative to overturn the new law. Valid signatures from 309,000 registered voters are needed for the initiative to qualify for the November general election ballot.
The initiative (I-645) would repeal the aspects of ESSB 6346 (2026) relating to the Millionaire’s Tax. It would also prohibit state and local governments from passing any tax on individual income, regardless of source. This provision was not included in the enacting legislation related to the Millionaire’s Tax. Finally, it would define income in state law as “any gain or benefit measured in money derived from an individual’s capital, labor, property, or other source.” This provision was also not included in the enacting legislation related to the Millionaire’s Tax.
Notably, the initiative does not repeal ESSB 6346 in its entirety. If the initiative were to pass, the bill’s expansion of the Working Families Tax Credit, the provision of tax relief for businesses and the elimination of sales tax on diapers, personal hygiene products and certain over-the-counter drugs would remain without revenue to cover the expenses.
Supporters of the Millionaire’s Tax recently launched a campaign, No645.com and the Invest in Washington coalition now has a website with links to additional resources.
Overview of the Millionaire’s Tax. As a reminder, the Millionaire’s Tax creates a 9.9% tax on households earning over $1 million per year. As an example, if a household earns $1,000,500 in one year, the tax will apply to $500 and the tax owed would be approximately $50. The tax takes effect on January 1, 2028, affecting 2028 taxable income and the state will begin collecting revenues in 2029.
Estimates are that the tax will apply to about 20,000 households in the state, and the tax is expected to generate approximately $3 billion a year. The law requires that 5% of the revenue generated must be deposited into the Fair Start for Kids Act which supports early learning and the remaining 95% of the revenue would be deposited into the state General Fund.
State Budget Build Timeline
While many of us are enjoying hot dogs and ice cream cones, Governor Ferguson’s administration is already deep in the throes of preparing his first biennial budget. In early June, the Governor’s Director of the Office of Financial Management (OFM) K.D. Chapman-See issued a budget instruction memo to state agency heads detailing the administration’s approach to the ongoing budget shortfall.
At this time, Governor Ferguson and OFM Director Chapman-See are not calling for across the board cuts but are making a number of requests of state agencies, including they consider pausing the phase-in of new programs; not propose creation of new programs; and consider programs created after January 1, 2019, when reviewing base budget expenditures.
Agency decision packages (budget recommendations) are due to OFM on September 14. The Governor and OFM will review these proposals, with the release of his first proposed biennial budget expected around December 20. As a reminder, agency Decision Packages are public, and we will release a summary in an upcoming newsletter.
Early Learning Program Updates
Policy work doesn’t end with the passage of bills of course. Following is a wrap-up of some early learning program updates over the legislative interim.
Early Learning Facilities – Additional Maintenance Grant Recipients Announced. On June 23, the Department of Commerce announced the awarding of $5.6 million to 37 early learning providers statewide for Early Learning Facilities Maintenance Grants (also referred to as Minor Renovation Grants). Maintenance Grants are designed to preserve existing capacity for children served in ECEAP and Working Connections Child Care programs.
This $5.6 million investment, a priority of the Early Learning Facilities Advocacy Group, was included in the 2026 Supplemental Budget. When Maintenance Grants were awarded following passage of the 2025 budget, qualified requests far exceeded available funding. The funding provided in the 2026 Supplemental Budget allowed all of the 2025 qualified projects to receive funding.
Working Connections Child Care. The 2026 legislative session included several substantive changes to Working Connections Child Care operations. The Department of Children, Youth and Families launched a dedicated website containing the latest updates on implementation of changes to attendance-based payments, regional rates, Market Rate Survey participation and more.
Transition to Kindergarten. The 2026 Supplemental Budget reduced funding for Transition to Kindergarten by one-third (roughly 2,000 slots statewide) and ESSB 6260 reprioritized Transition to Kindergarten funding.
For the upcoming 2026-27 school year, the Office of the Superintendent of Public Instruction (OSPI) determined the slot allocation by school district. You can access the information by visiting OSPI’s TTK website, looking under TTK 2026-27 on the upper right and downloading the document entitled “SY 27 TK Funding Cap for Distribution.” You will note OSPI made the decision not to “zero out” any district – meaning every district that previously operated TTK maintains at least one classroom.
OSPI also released a “TTK Reductions FAQ” in response to school district questions. An item of note in the FAQ is that school districts will have “significant latitude in establishing the sliding fee schedule” permissible under the new law. Another FAQ response provides that “There is nothing that prohibits state funding and tuition revenues from being combined. This approach would allow all students to pay the same, lower tuition amount, except for certain groups who must be exempt from tuition fees for Transition to Kindergarten under the law.” I am interested in how many districts decide to offer a sliding scale fee to families and how much will be charged.
Finally, just this week Seattle Times education reporter Claire Withycombe released a two-part series on Transition to Kindergarten. The first part, This WA Pre-K Program is Hugely Popular – and in Peril, provides an overview of TTK and a state of the program given the recent budget cuts. The second part, WA Pre-K Program Growth a Frustration for Some Childcare Providers, focuses on the child care provider point of view. This series will certainly generate conversation.
PreK Promise. A June 24 press release from the Department of Children, Youth and Families announced that the first year of a 10-year commitment by Ballmer Group will support the addition of 2,500 school-day length ECEAP slots at 54 sites in the upcoming 2026-27 school year.
Dubbed the “PreK Promise” program, Ballmer Group’s 10-year, $1 billion commitment will ultimately support 10,000 new ECEAP slots. In this first year, Ballmer Group’s $40.6 million donation will support approximately 2,500 new slots.
More detailed information on the slot and provider location information will be available in July.
Trivia Answer
California’s current Capitol renovation project, totaling at least $1.1 billion, could rival the cost of constructing a new NFL stadium.
The California State Capitol Building, first occupied in 1869, in May 2026
The “In Progress” Capitol Annex Project on May 31, 2026. The renovated annex will replace the “old” annex that existed from 1954 – 2021 (RIP).
(Photo credit: Erica Hallock)
In contrast to Washington state’s Capitol “campus,” California’s Capitol infrastructure has long been contained to one building, fondly referred to as “the Building.”
The historic portion of the four-storied Capitol which opened in 1869, holds the Senate and Assembly chambers; offices for legislative leadership; and several legislative committee hearing rooms. In 1954, a six-story annex was adjoined to the historic Capitol to house the Governor and Lt. Governor; the balance of the 120 legislators (and their staffs – which are much larger than those in our state); support staffs and even more committee rooms.
After years of deliberation, the decision was finally made in the late 2010s to demolish the Annex in its entirety for a number of reasons (including findings of asbestos and lack of ADA compliance). The logistics involved in ensuring that the operations of a full-time Legislature could continue with minimal interruption were not insignificant.
A critical logistic was ensuring the construction of a separate building that could house 2,000 legislators and staff (and the Governor!) within walking distance of the Capitol in an already busy downtown city. Fortunately, a legislative staff garage fit the bill, and a 10-story “swing building” was constructed on that old parking garage site. Note that if you see pictures of Governor Gavin Newsom at work, he is likely working out of his “swing building” office as the Governor’s Office is under construction.
Interestingly, there has been pushback by the Joint Assembly and Senate Rules Committee which oversees the project to release the true cost of the project. According to KCRA 3 (the Sacramento NBC affiliate), there has not been an update on the costs of the project for over four years (which at the time was expected to be $1.1 billion). With inflation, one would expect the costs to be much higher. Just down the street from the Capitol is the relatively new Golden 1 Center (home of the Sacramento Kings). That arena’s construction was less expensive than the Capitol’s work.
I started my career working in “the Building,” so when I made a trip back to Sacramento in May, my former colleague and I had to go check out the construction (and share old war stories, of course). Needless to say, my friend and I did not agree with the modern glass look of the new Annex blending into the Neoclassical look of the original Capitol building, but I guess everyone is a critic.
I read the new Annex is expected to have lawmaker-only secret hallways for security purposes. Because the old Annex had six stories and the original Capitol building has four stories, there were already not so secret ways to maneuver between the two sides. I was sad to see that one of our “secret passageways” was boarded shut with a padlock.
“I’m just trying to get to the Cafeteria!”
I plan to be on OUR campus in Olympia later this month and will provide an update on our more measured Capitol construction. I just checked, and our Joel Pritchard Building renovation only costs a reasonable $131 million, according to the Olympian.
Sources: KCRA 3 and the Olympian
